Wisconsin Lawyer: Lawyers Owe Fiduciary Duty to Client:

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    November
    05
    2009

    Lawyers Owe Fiduciary Duty to Client

    The relationship between client and lawyer is rooted in confidence and trust. It is the nature of this relationship that creates a lawyer’s fiduciary duty to clients.

    Dean R. Dietrich

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 82, No. 11, November 2009

    Question

    I often hear speakers talk about the fiduciary duty that a lawyer owes to a client. What does this mean?

    Answer

    It is well recognized that a lawyer owes a fiduciary duty to a client. It is also recognized that a lawyer may owe a fiduciary duty to her employing law firm, which is a topic for a different article.

    In 2008 the Wisconsin Supreme Court reaffirmed in Berner Cheese Corp. v. Krug1 its view of the fiduciary duty that a lawyer owes to a client. In this case, a dispute arose between the client and the lawyer, who both were listed in the settlement of a litigation matter. It was alleged that the lawyer had breached a fiduciary duty owed to the client, but the circuit court dismissed that claim.

    In its decision, the supreme court acknowledged that a lawyer owes a fiduciary duty to a client because of the fiduciary relationship that exists between the client and the attorney. There was really no dispute that a fiduciary relationship existed; the dispute that arose was whether that fiduciary relationship was breached. The court held as follows:

    Dean 
Dietrich

    Dean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is chair of the State Bar Professional Ethics Committee.

    “The elements of a claim for breach of fiduciary duty are: (1) the defendant owed the plaintiff a fiduciary duty; (2) the defendant breached that duty; and (3) the breach of duty caused the plaintiffs damage. Reget v. Paige, 2001 WI App 73, ¶ 12, 242 Wis. 2d 278, 626 N.W.2d 302.

    “Wisconsin law has long recognized that attorneys owe a fiduciary duty of loyalty to their clients, e.g., In Re Law Examination of 1926, 191 Wis. 359, 362, 210 N.W. 710 (1926). An attorney might breach that duty when he enters into a transaction with his client without fully informing the client of the risks that the transaction will potentially benefit the attorney and will potentially disadvantage the client. See Zastrow v. Journal Communications, Inc., 2006 WI 72, ¶ 30, 291 Wis. 2d 426, 718 N.W.2d 51. Indeed, we have promulgated a Supreme Court Rule forbidding lawyers licensed in Wisconsin from entering into business transactions with clients, unless they ensure the presence of certain safeguards. SCR 20:1.8(a)….”2

    The court went on to say:

    “A breach of fiduciary duty does not arise simply because a lawyer gives poor, but well-meaning, legal advice. (Citations omitted). It requires something more: the breach of the attorney’s duty of loyalty to the client.”3

    The above quotations give credence to the notion that a lawyer owes a fiduciary duty to a client. The Restatement (Third) of the Law Governing Lawyers, section 16, gives further guidance regarding the fiduciary duty that a lawyer owes to a client. This section provides as follows:

    § 16. A Lawyer’s Duties to a Client – In General

    To the extent consistent with the lawyer’s other legal duties and subject to the other provisions of this Restatement, a lawyer must, in matters within the scope of the representation:

    1. proceed in a manner reasonably calculated to advance a client’s lawful objectives, as defined by the client after consultation;
    2. act with reasonable competence and diligence;
    3. comply with obligations concerning the client’s confidences and property, avoid impermissible conflicting interests, deal honestly with the client, and not employ advantages arising from the client-lawyer relationship in a manner adverse to the client; and
    4. fulfill valid contractual obligations to the client.4

    That a lawyer might be liable for a breach of the fiduciary duty owed to the client is also recognized by the following:

    § 49. Breach of Fiduciary Duty – Generally

    In addition to the other possible bases of civil liability described in §§ 48, 55, and 56, a lawyer is civilly liable to a client if the lawyer breaches a fiduciary duty to the client set forth in § 16(3) and if that failure is a legal cause of injury within the meaning of § 53, unless the lawyer has a defense within the meaning of § 54.5

    Thus, lawyers must recognize that they owe to their clients a fiduciary duty that includes protecting the client’s confidences and property, avoiding conflicting interests, dealing honestly, and not taking advantage of the attorney-client relationship.

    Conclusion

    Lawyers owe a fiduciary duty to their clients. This duty is often assumed into the concept of legal malpractice and is embodied in the relationship maintained between the lawyer and the client. Lawyers must remember that this fiduciary duty is owed to the client and is not satisfied simply by complying with the Rules of Professional Conduct. The lawyer must always be sensitive to the important aspects of this fiduciary duty.

    Endnotes

    1Berner Cheese Corp. v. Krug, 2008 WI 95, 312 Wis. 2d 251, 752 N.W.2d 800.

    2Id. ¶¶ 40-41.

    3Id.¶ 57 (citing Zastrow, 2006 WI 72, ¶ 30, 291 Wis. 2d 426).

    41 Restatement of the Law (Third), The Law Governing Lawyers § 16, at 146.

    5Id. § 49, at 348.   




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